Delhi District Court
Mohd. Kamran vs U.P. Handicrafts Development & ... on 17 April, 2018
IN THE COURT OF PRAVEEN KUMAR: ADDITIONAL
DISTRICT JUDGE05 :NEW DELHI DISTRICT, PATIALA
HOUSE COURTS, NEW DELHI.
Arbt. No.12931/16
In the matter of :
Mohd. Kamran
S/o Dr. Mohd. Zakir,
R/o F16, Nizamuddin West,
New Delhi .................Applicant/Objector
Versus
1. U.P. Handicrafts Development & Marketing
Corporation Limited, 2, Rana Pratap Marg,
Motimahal, Lucknow226001,
Uttar Pradesh
2. Sh. Madan Raja Maurya,
Sole Arbitrator,
Finance Controller,
U.P. Handicrafts Development & Marketing
Corporation Limited, 2, Rana Pratap Marg,
Motimahal, Lucknow226001,
Uttar Pradesh ..................Respondents
JUDGMENT:
1. This is a petition filed by the petitionerobjector u/S 34 of the Arbitration & Conciliation Act, 1996 (in short 'the Act') against the award dated 16.11.2015 passed by Ld. Sole Arbitrator (respondent no.2) whereby the petitioner has been directed to pay to the respondent no.1 (hereinafter referred to as respondent, Arbt. No.12931/16 Mohd. Kamran Vs. U.P. Handicrafts Development & Marketing Corporation Ltd.
Page No.1 of 15respondent no.2 being the Sole Arbitrator) a sum of Rs.56,86,255.50/ with interest @ 18% p.a.
2. Briefly stating, the facts leading to the arbitration are that the petitioner was granted a Counter in the showroom of the respondentGangotri Emporium at 5B, Khadak Singh Marg, New Delhi. The petitioner was to sell his products such as jewellery (precious, semi precious, studded etc) and other items of art & craft etc. and a certain percentage of the sale proceeds was to be retained by the respondent as its commission and the rest of the sale proceeds was to be paid back by respondent to the petitioner. It is the case of the respondent that vide agreement dated 17.05.1999 the petitioner was allowed to sell precious and costume jewellery etc. for the period from 21.04.1999 till 20.04.2002. Other agreements dated 10.08.2000, 14.08.2001 and 16.02.2001 were also executed between the parties whereby petitioner was allowed to sell handicraft, brass ware, EPNS and silver ware items.
3. Respondent has further claimed that vide agreement dated 21.04.2002, which was valid for two years commencing from 21.04.2002, the petitioner was allowed to sell precious jewellery, silver jewellery and stones in the abovesaid showroom. However, the petitioner has strongly disputed the execution of the said agreement.
4. As per respondent certain amounts were due under these agreements and in order to recover the outstanding amount Arbt. No.12931/16 Mohd. Kamran Vs. U.P. Handicrafts Development & Marketing Corporation Ltd.
Page No.2 of 15of Rs.48,10,000/, they invoked U.P. Public Money (Recovery of Dues) Act, 1972 and issued Recovery Certificate dated 23.02.2006 for the said amount together with interest @ 18% p.a. Another Recovery Certificate dated 23.04.2007 was issued under the said Act for recovery of Rs.13,75,887/ together with interest @ 18% p.a. The petitioner challenged both the abovesaid Recovery Certificates in the High Court of Delhi by filing Writ Petition (Civil) No.6100/2006. Vide order dated 29.07.2009, the Recovery Certificate dated 23.02.2006 was quashed and the matter was referred to arbitration. Pursuant to the said order, Sh. P.K. Singh, the then MD of the respondent was appointed as Sole Arbitrator by the respondent vide letter dated 11.01.2010 to adjudicate the dispute. Sh. P.K. Singh, however, declined to proceed with the arbitration due to his transfer and, consequently, Sh. Madan Raja Maurya, Finance Controller of respondent was appointed by the MD of the respondent as the new Arbitrator vide letter dated 22.05.2010.
5. Objections have been filed by the petitionerMohd. Kamran on the following grounds:
(i) That the arbitrator being in the employment of the respondent was biased and not independent and impartial. The impugned award was passed by the Sole Arbitrator acting under the influence of respondent.
(ii) That the objection raised by the petitioner vide his letter dated 29.05.2010 regarding appointment of said Arbt. No.12931/16 Mohd. Kamran Vs. U.P. Handicrafts Development & Marketing Corporation Ltd.
Page No.3 of 15arbitrator was rejected by the MD of the respondent. Similarly, the objection raised with the Ld. Sole Arbitrator vide letter dated 24.07.2010 was also rejected by him vide letter dated 18.10.2010, thus violating the spirit of the Act.
(iii) The Sole Arbitrator passed the impugned award without giving the petitioner an opportunity to prove his case and examine his witnesses.
(iv) The impugned award was passed in a haste without hearing the arguments.
(v) There is no appreciation of the evidence produced before the Ld. Sole Arbitrator.
(vi) The issues mentioned in the impugned award were never framed and the Sole Arbitrator wrongly stated in the impugned award that the issues were framed with the concurrence of the parties.
(vii) The impugned award suffers from the malady of being in conflict with morality and justice.
(viii) That the impugned award was affected by fraud as the documentsEx.R and statement of accountproduced by the respondent are forged documents.
(ix) That the award was passed after a period of 18 months from the date of the arbitrator entering upon the reference.
6. I have heard Sh. Ramit Malhotra, ld. Counsel for the petitioner and Sh. Ratik Sharma, ld. Counsel for the respondent.
Arbt. No.12931/16Mohd. Kamran Vs. U.P. Handicrafts Development & Marketing Corporation Ltd.
Page No.4 of 15Ld. Counsel for the petitioner has contended that the agreement dated 21.04.2002 was neither executed nor acted upon by the parties. According to him, the original of the same was never produced before the arbitral tribunal. Secondly, it is contended that once it is held that commission is payable under out of court settlement dated 03.05.2004 (wrongly typed as 03.05.2005 in last para of award), commission as per agreement dated 21.04.2002 cannot be awarded because the said letter covers the period not only upto 31.03.2003 but also from 21.04.2003 to 30.04.2004 and further from 01.05.2004 to 30.04.2006. It is contended that the award is, thus, selfcontradictory. Lastly, it is contended that the demand upto 31.03.2003 stands paid in compliance of letter dated 03.05.2004 (MarkP), which is confirmed by respondent vide letter dated 20.02.2005 (MarkQ). Hence, there is no dispute upto 31.03.2003. Ld. Counsel has prayed that award be setaside.
7. On the other hand, Ld. Counsel for the respondent has contended that the scope of the objections u/S 34 of the Act is limited. The court cannot go into the merits of the case. It is contended that the Court cannot act as an Appellate Court against the award passed by Ld. Sole Arbitrator. Next, it is contended that this court has no jurisdiction to entertain the petition as the appropriate court in Lucknow would be the court having jurisdiction. In support of his contentions, he has relied upon judgments - DDA Vs. Bhardwaj Brothers, AIR 2014, Delhi 147; Ardee Infrastructure Vs. Anuradha Bhatia, 237 (2017) DLT 140;
Arbt. No.12931/16Mohd. Kamran Vs. U.P. Handicrafts Development & Marketing Corporation Ltd.
Page No.5 of 15Laxmi Mathur Vs. The Chief General Manager, MTNL, 2000 (3) MhLj 841 and Sumitomo Vs. ONGC, AIR 2010 SC 3400.
8. I have gone through the file as well as the written submissions filed on behalf of the petitioner. I have also gone through the judgments cited before me.
9. As regards the jurisdiction of the court in Delhi or Lucknow is concerned, the petitioner had filed the Writ Petition (Civil) No.6100/2006 in High Court of Delhi challenging the Recovery Certificate issued by the respondent. The parties had agreed to Delhi being the venue of arbitration, as recorded in the order dated 29.07.2009 of the High Court of Delhi in the said Writ Petition. Thereafter, the arbitration proceedings were also held at the premises of respondent i.e. Baba Khadak Singh Marg, New Delhi and both the parties participated in the proceedings without any protest. Hence, the plea of respondent regarding lack of jurisdiction of this court is without any merit and the same is rejected.
10. The petitioner has raised the issue of applicability of Section 29(A) of the Arbitration & Conciliation (Amendment) Act, 2015. A perusal of the Section 29(A) shows that a time limitation has been prescribed for an arbitrator to make an award. This provision came into effect on 23.10.2015. It applies to arbitration proceedings commenced by the arbitrator after the coming into effect of the amendments of the said Act. In fact, Section 26 of the Amendment Act of 2015 specifically mentions Arbt. No.12931/16 Mohd. Kamran Vs. U.P. Handicrafts Development & Marketing Corporation Ltd.
Page No.6 of 15nonapplication of the provisions of the Amendment Act to arbitral proceedings commenced in accordance with the principal Act before the commencement of this Act. The only exception carved out is agreement between the parties to make the said provision applicable, which is not so in the present case. In judgment - Aardee Infrastructure (supra), it has been held as under: "On the other hand, if the expression "to the arbitral proceedings" used in the first limb of Section 26 is given the same expansive meaning as the expression "in relation to arbitration proceedings" as appearing in the second limb of Section 26, then, the matter becomes very simple and does not result in any anomaly. All the arbitral proceedings (and here we mean the entire gamut, including the court proceedings in relation to proceedings before the arbitral tribunal), which commenced in accordance with the provisions of Section 21 of the said Act prior to 23.10.2015, would be governed, subject to an agreement between the parties to the contrary, by the unamended provisions and all those, in terms of the second part of Section 26, which commenced on or after 23.10.2015 would be governed by the amended provisions".
Hence, this plea of the petitioner is rejected.
11. Though not referred to or relied upon, in recent judgment - Harbhajan Kaur Bhatia Vs. M/s Aadya Trading & Investment Pvt. Ltd., FAO No.355/2016, decided on 18.07.2017, our High Court of Delhi speaking through Hon'ble Mr. Justice Valmiki J. Mehta has held as under: "This Court is receiving many judgments of the courts below which are most unfortunately dismissing the objections by simply stating that the Award is not against the public policy or the Award does not violate the ratio Arbt. No.12931/16 Mohd. Kamran Vs. U.P. Handicrafts Development & Marketing Corporation Ltd.
Page No.7 of 15of the judgment of the Supreme Court in Oil & Natural Gas Corporation Ltd. Vs. Saw Pipes Ltd. (2003) 5 SCC 705 and the other connected judgments. In my opinion, this is an unacceptable practice. Since this Court has received a series of cases where objections under Section 34 of the Act are being decided without even mentioning what the disputes between the parties are, how the Award has decided the same and how a court hearing objections under Section 34 of the Act cannot interfere because the Award, as per the reasoning, is neither illegal or perverse including not falling under the ingredients of Section 34 of the Act, therefore, while setting aside the impugned judgment on the ground of complete absence of reasoning as also discussion as regards what were the issues involved and how they are decided, a copy of this Court's judgment along with the impugned judgment dated 10.12.2015 be put up before Hon'ble the Acting Chief Justice, so that appropriate directions can be issued, if Hon'ble the Acting Chief Justice so deems fit, to the District Courts that nonspeaking judgments cannot be passed while dealing with the objections which are filed under Section 34 of the Act".
12. The next plea raised by the petitioner is that the Arbitrator appointed by the MD of the respondent was an interested party. A perusal of the memo of parties shows that Sh. Madan Raja Maurya, the Sole Arbitrator was employed with respondent as its Finance Controller. While disposing of the Writ Petition, the High Court of Delhi in its order dated 29.07.2009 had mentioned that if a request is received from the petitioner for appointment of retired judge as an arbitrator, the same may be considered by the MD of respondent.
13. In Section 12 of the Act, the grounds for challenge to the appointment of the arbitrator have been provided. Section 12 (1) of the Act requires that when a person is approached for his Arbt. No.12931/16 Mohd. Kamran Vs. U.P. Handicrafts Development & Marketing Corporation Ltd.
Page No.8 of 15appointment as an arbitrator, he shall disclose in writing any circumstances likely to give rise to justifiable doubts as to his independence or his impartiality. Under Section 12 (3) of the Act, this has been mentioned as a ground for challenging his appointment. The sole arbitrator is also required under Section 12 (2) of the Act to disclose to the party in writing any circumstances mentioned in Section 12 (1) i.e. about his independence or his impartiality. This reference has been made because the spirit of the Act is that the arbitrator be an independent and impartial person. Keeping the spirit of this provision, the amended Act has elaborated the spirit further where the arbitrators have direct or indirect, past or present relationship with, or interest in any of the parties, or in relation to subject matter in dispute, whether financial or other kind is likely to be give rise to justifiable doubts as to his independence or impartiality. The factum of Sole Arbitrator being not independent or impartial is prima facie borne out by the fact that the sole arbitrator was working as a Finance Controller of respondent. Being an interested party, his independence and impartiality comes under a cloud which forces the court to look into the conduct of the arbitration proceedings as well. No doubt, this Court is not to act as a court of appeal to discuss the justification and reasons for making the award. However, for the limited purpose of assessing biasness, the award can be looked into. On page 16 of the award, the arbitrator has pointed out the counter claims raised by the petitioner herein. The Arbt. No.12931/16 Mohd. Kamran Vs. U.P. Handicrafts Development & Marketing Corporation Ltd.
Page No.9 of 15arbitrator while dealing with the claim of the respondent under different heads has given credit of certain payments made by the petitioner to respondent. However, the arbitrator has not dealt with or returned any finding on counter claim nos. 2, 3 & 4, which deal with the release of the sale proceeds deposited by the petitioner with the respondent for the period 21.4.2003 to 30.4.2004 (counter claim no.2) and 1.5.2004 to 19.10.2005 (counter claim no.3). Counter claim no.4 deals with claim for damages. Under the Arbitration Act, 1940 the Arbitrator could give a speaking or a non speaking award. It is not so under the 1996 Act. U/ s 13 (1)
(c) of the Act, it is mandaotry that the arbitral award shall state the reasons upon which it is based unless the parties have agreed to the contrary. There is nothing on record to show that the parties agreed to a non speaking award. The award suffers from this malady wherein the arbitrator has neither given any reasons nor has he dealt with the counter claim nos. 2, 3 and 4 of the petitioner for not deciding them at all. This also vitiates the award.
14. The next objection raised by the petitioner is that after completition of evidence of respondent, the counsel for the petitioner on 17.1.2015 had moved an application for forensic examination of documentsEx.R (dated 31.10.2003) and Ex.P27 (dated 17.3.2003) in order to prove that document Ex.R (produced by witness of respondent in his evidence) is a forged document. This application was replied to by the respondent vide reply dated 4.6.2015. The arbitrator heard arguments on this application on Arbt. No.12931/16 Mohd. Kamran Vs. U.P. Handicrafts Development & Marketing Corporation Ltd.
Page No.10 of 1527.8.2015 and reserved the order on the same. The grievance of the petitioner is that thereafter no opportunity was granted to him to lead any evidence in rebuttal of the claims or in support of the counter claims and to address arguments. The arbitrator proceeded to make and publish the award thereafter in a hurried manner. The record of the arbitral proceedings does not bear any such opportunity having been granted to the petitioner.
15. The petitioner has also raised the ground of the arbitral award being hit by morality and justice, besides being affected by fraud. In the light of these plea/objections, before this Court deal with these pleas, though not referred to or relied upon, it will be desirable to refer to the judgment of the Apex Court in the matter of Associate Builders vs. DDA, 2015 (3) SCC 49, where the term 'public policy of India' has been discussed and explained extensively. The award passed by the arbitrator was held in the said judgment to be against 'fundamental policy of Indian law' on the following grounds:
(a). When it is not in compliance with statutes or judicial precedents
(b). When it violates the principles of judicial approach
(c). When it is not in compliance with principles of natural justice
(d) When it violates the principles of Wednesbury Reasonableness i.e. that the award is perverse
16. In the present case the objection of the petitioner is Arbt. No.12931/16 Mohd. Kamran Vs. U.P. Handicrafts Development & Marketing Corporation Ltd.
Page No.11 of 15that after the hearing the arguments on application, neither was the objector granted an opportunity to lead any evidence in reubuttal of the claims of respondent nor was he granted an opportunity to lead any evidence in support of his counter claims. Moreover, no arguments on the merits of the claim or the counter claims were heard or opportunity given for the same. As such, there has been violation of principles of natural justice. These objections have been mentioned in grounds (v) and (vi) of the petition, while respondent in its reply has pleaded want of knowledge. Thus, this allegation stands admitted and on this ground itself the award is to be set aside.
17. The petitioner has raised the plea of sole arbitrator not being an independent and impartial arbitrator because he was in the employment of the respondent as Finance Controller. This objection has been raised in ground (iii) of the petition. In response, the respondent has denied the said ground and yet contradicted itself by pleading further that the said appointment was not challenged. However, it is further pleaded that the said appointment was as per para 20 of the agreement dated 21.4.2002 which empowered the M.D to arbitrate himself or appoint someone else. A perusal of the record does not show that the sole arbitrator disclosed in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality. Section 12 (1) of the Act makes it mandatory for the arbitrator to make such disclosure. The petitioner in arbitration proceedings raised Arbt. No.12931/16 Mohd. Kamran Vs. U.P. Handicrafts Development & Marketing Corporation Ltd.
Page No.12 of 15this issue of lack of jurisdiction along with his statement of defence. U/s 16 of the Act the Arbitrator has been given the right to rule on his own jurisdiction. U/s 16 (2) of the Act, the plea in this regard has to be raised not later than the submission of defence. This condition was fulfilled and yet the arbitrator chose not to rule on its own jurisdiction. In this manner, he left the issue open to be considered by the Court. It is a matter of record that the sole arbitrator was the Finance Controller of the respondent.
18. The arbitrator by not giving the declaration in terms of S.12 (1) of the Act has violated the mandate of law. By not giving opportunity to lead evidence or address arguments, the Sole Arbitrator has violated the principles of natural justice. Taking the aforesaid facts into consideration as a whole, the Sole Arbitrator seems to be a person who was directly interested in the claims of the respondent, which also render the award liable to be set aside. The petitioner has also raised the plea of fraud which is available u/s 34 (2) (d) (Explanation 1) of the Act. According to the petitioner, the documentsEx.R and the Statement of Accounts produced by the respondent are forged documents. As per the petitioner, letter Mark O (dated 22.7.2003) signed by witness A K Mittal, the commission due upto March 2003 has been shown as Rs.9,01,570.51/ paisa, which figure also finds mention in the account statement annexed along with letter Mark N ( dated 13.6.2003). Whereas the commission due as per the statement of account produced by the said witness in his evidence is shown as Arbt. No.12931/16 Mohd. Kamran Vs. U.P. Handicrafts Development & Marketing Corporation Ltd.
Page No.13 of 15Rs.2324286.25 paisa on 31.3.2003. The said statement of account produced in evidence is neither signed by anyone nor certificate u/s 65B of the Indian Evidence Act in support thereof has been filed. In comparison thereof, the account statement annexed along with letter Mark N dated 13.6.2003 has been signed by three responsible officers of respondent including the witness Sh. A K Mittal.
19. Regarding documentEx.R dated 31.3.2003 (produced by witness Sh. A K Mittal on 11.12.2014), the plea of the petitioner is that signature at point A on the said document does not match with the signature of Sh. Sukhjinder Singh on documents produced by him in his evidence and witness Sh. Sukhjinder Singh never produced the same in his evidence though he stated in his evidence that after voucher dated 17.3.2003, next voucher was prepared on 2.4.2003.
20. It is the settled law that this Court cannot act as an appellate court for deciding objections u/s 34 of the Act. However, the question to be decided in the present case is 'whether the arbitrator has given the findings on facts on the basis of the evidence on record. A perusal of the arbitration proceedings shows that though the evidence has been led in the case but surprisingly while deciding the dispute between the parties, the arbitrator has failed to take into consideration the evidence led and pass the award. As per Section 34 (2) (b) Explanation of the Act, an award is to be set aside on the ground of fraud. This Court is of Arbt. No.12931/16 Mohd. Kamran Vs. U.P. Handicrafts Development & Marketing Corporation Ltd.
Page No.14 of 15the view that since the Arbitrator while passing the award has not considered the evidence led before him, it makes the award perverse. The plea of fraud being raised by the petitioner on the ground that respondent played fraud upon the petitioner as well as the Tribunal by seeking to get award passed in their favour by producing forged documents. Arbitrator ought to have given an opportunity to the petitioner to prove his plea of fraud. By declining the same and, thereafter, passing the award without giving the petitioner an opportunity makes the award unfair and unreasonable. The award is, thus, liable to be set aside.
21. In view of the above discussion, this court is of the view that the Award is not sustainable and the same is setaside.
Dictated and announced in (PRAVEEN KUMAR) open court today i.e. on 17.04.2018. Additional District Judge05, NDD, Patiala House Courts, New Delhi. (R) Arbt. No.12931/16 Mohd. Kamran Vs. U.P. Handicrafts Development & Marketing Corporation Ltd.
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